GM, Chrysler Finalize Plans To Restructure

By Kendra Marr
Washington Post Staff Writer
Tuesday, February 17, 2009

General Motors and Chrysler raced to save their place in the American auto industry yesterday, putting the final touches on plans to curb production, cut jobs and pare brands in hopes of securing billions of dollars in additional federal aid.

The plans they are scheduled to submit today to the Obama administration call for a broad restructuring of their operations at a time the industry is suffering one of its steepest declines in decades. But as detailed as the plans are, they are more of a starting point than an end.

In recent weeks, union leaders and bondholders have sparred with the companies over who should make concessions first. All sides remained in negotiations late last night.

GM's efforts to sell Hummer and Saab have yet to secure buyers, and Chrysler's goal of fashioning an alliance with Italian automaker Fiat remains uncertain enough that it is drawing up an alternative plan that assumes the partnership won't happen.

Efforts to reduce the number of dealerships have been met with resistance, as local ownership groups lobby their state legislatures for laws making it more expensive to close them.

Adding to the disarray, the Obama administration announced this weekend that it would not name a "car czar" to oversee the restructuring plans but instead rely on a team of government officials. Treasury Secretary Timothy F. Geithner and Lawrence H. Summers, director of the National Economic Council, will oversee the panel.

The White House has made it increasingly clear in recent days that it intends to be a partner in the industry's restructuring and has declined to rule out the possibility that the companies may have to do so under bankruptcy protection.

"We have to ensure that the cars of tomorrow are built here by Americans, for Americans," White House Press Secretary Robert Gibbs told reporters yesterday.

More than ever, the companies will require federal assistance to manage the transition. The government has already agreed to give GM $13.4 billion in federal loans, $4 billion of which will be handed over this month if the Treasury is satisfied with GM's restructuring plan. But as sales continue to slump, GM has inched closer to its worst-case scenario, in which it needs a total of $18 billion to survive, said people familiar with the matter who spoke on condition of anonymity because the details are not public.

Chrysler has already received $4 billion, and James Press, the company's vice chairman and president, said he planned to seek $3 billion more to ride out the economic downturn.

Although the plans are a milestone for the industry, they aren't the beginning of the restructuring process. Over the past decade, Detroit's automakers have been shrinking operations to compete with their more agile foreign rivals and battle declining sales.

GM has halved its workforce since employment peaked at nearly 200,000 workers in 2000. It has slashed 40 percent of its models, focusing on smaller cars and so-called crossover vehicles, and streamlined its distribution network, cutting 1,000 dealers. Since 2005, the company has reduced annual structural costs by $10 billion.

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